Nadella had said in an interview last week that structural changes were expected at the company and that the marketing and engineering departments could be where there will be redundancy after Nokia's handset unit is integrated. The company added nearly 25,000 employees when it took over Nokia's handset business for $7.2 billion.
"Nothing is off the table in how we think about shifting our culture," Nadella said in the interview.
Sources close to the matter said that this round of job cuts could surpass the 5,800 positions eliminated in 2009, making it the largest in the tech company's history.
Nomura Securities analyst Rick Sherlund made a prediction last Friday that Microsoft will lay off around five to 10 percent of its workforce. He added that the company could save $1 billion in costs through a 25 percent reduction in the Nokia business.
Microsoft has in the past undergone smaller job cuts, mostly in the advertising and sales department, but this will be the first time the company undergoes a major restructuring since 2009, when it trimmed its workforce at the start of the recession.
The Redmond-based company will announce its Q4 earnings on July 22 and the reported layoffs have had little effect on the company's share price.